The Impact of the COVID-19 Pandemic on Public Finances of Spain and Poland in the Period 2020–2021: Historic and Economic Perspective

Abstract The conclusion emerging from the analysis on the impact of the COVID-19 pandemic on public finances in Spain and in Poland in the years 2020–2021 shows that the effects should be considered in the short-term and long-term perspectives. The short-term perspective is featured by deterioration of the budget condition and the public debt ratio of both countries in the first year of the pandemic, and an improvement of the situation in 2021. The effects of the pandemic for public finances were far more severe in Spain, which – viewed objectively – resulted from the fact that financing of the support programmes was to a larger extent based on funds from the state budget. In Poland the impact of these expenditures on the budget was relatively insignificant since the majority of the outlays were taken outside of the state budget, and even out of the sphere of public finances. As a consequence, the budget deficit remained at a moderate level and the debt of the public sector in relation to GDP was half that of Spain. Despite the fact that the condition of public finances was markedly worse there after two years of combating COVID-19, it was decisively more transparent. Admittedly, the model introduced in Poland ensured peace in the system of public finances on the formal side, but it meant future costs that were unavoidable and difficult to assess.